DO WEBSITE TERMS OF USE BIND CUSTOMERS? SOMETIMES.


February 19, 2013

At the bottom of virtually every website is a link titled "Terms of Use" or "Terms and Conditions." Click on this and you will see the conditions a company wants to impose on its customers who click through their website. Traditionally courts have held that "terms of use" and "privacy policy" sections of a website are binding. However, a recent federal court decision ruled that a major company's Terms and Conditions was not enforceable and how the implementation of the user agreement (user agreements are what the courts typically call Terms of Use and/or Privacy Policies) was why the court decided the user agreement was not enforceable.

There are two categories of user agreements. The least effective user agreement is the browsewrap agreement. Businesses who adopt this approach take the position that the customer agrees to the user agreement by virtue of the customer merely visiting the website. No affirmative action is required by the customer other than visiting the website.

Contrast this approach with the clickwrap agreement. In the clickwrap agreement, the customer must click "OK" or "Agree" in order to accept the User Agreement before he can access the website. The best example I can think of is Apple. Anybody who has iTunes is familiar with the almost biweekly updates to the "terms and conditions" and that if you want to continue to use iTunes, you have to "Agree" or click "OK".

However, as much as people may criticize Apple, they are doing it correctly. Every time a change is made to a user agreement, it is a best practice to obtain the affirmative consent of the user. Failure to do so leaves the user agreement open to attack. The argument is that because the user was not aware of the one-sided unilateral change, it will not be controlling. In fact, this is exactly why the federal district court invalidated the Zappos user agreement. Because Zappos failed to obtain the customer's acceptance of new terms and conditions, Zappos was unable to impose its mandatory arbitration provision against its customer.

Even if a business decides to proceed with a clickwrap agreement, care must still be given to the substance of these provisions as well. If you have any questions concerning any aspect of your web site, want to implement terms and conditions, privacy policies, or just have a question regarding your business in general, please feel free to contact Douglas Leavitt at Danziger Shapiro & Leavitt.